G.R. No. 259051 , February 26, 2025
EDWARD C. CIACHO, PETITIONER, vs. SPOUSES ADOLFO T. DE GUIA AND FE ALMA V. DE GUIA [DECEASED]; AND BAYANI S. CERILLA [DECEASED], SUBSTITUTED BY HIS HEIRS, MARY BERNADETTE G. CERILLA AND BYATRES MARI CERILLA-BOHOL, RESPONDENTS.

FACTS

Petitioner Edward C. Ciacho assails the Court of Appeals (CA) Decision and Resolution which affirmed the Regional Trial Court (RTC) ruling. The RTC declared invalid a Deed of Absolute Sale over two parcels of land in Tacloban City executed by respondent Bayani S. Cerilla in favor of Ciacho. Respondent Adolfo de Guia inherited the properties. In 1994, to avoid foreclosure, Adolfo convinced Cerilla to redeem the mortgaged properties. Deeds of Absolute Sale were executed by Adolfo in favor of Cerilla, and new titles were issued in Cerilla’s name. Cerilla later executed a Deed of Absolute Sale selling the properties back to Adolfo, but this deed was not notarized, prompting Adolfo to annotate an Adverse Claim on the titles. The parties then entered into a Memorandum of Agreement (MOA) for Cerilla to buy the properties for PHP 15 million, with Adolfo responsible for ejecting illegal settlers. Adolfo failed to eject the settlers, so Cerilla attempted to do so, incurring costs and securing a loan from Far East Bank and Trust Company (FEBTC) using one property as collateral. Cerilla also obtained loans from Ciacho, secured by a Real Estate Mortgage over both properties. Ciacho conditioned the loan on the removal of encumbrances. Adolfo executed an Affidavit assuring Ciacho the adverse claims were settled, and Cerilla’s loan with FEBTC was paid, clearing that encumbrance. Cerilla defaulted on the loans from Ciacho. Ciacho prepared a Deed of Absolute Sale for the properties, which Cerilla signed but requested not be registered. Adolfo later discovered the properties were registered in Ciacho’s name. Adolfo filed a complaint for Annulment of Deed of Sale with Damages. The RTC ruled in favor of Adolfo, annulling the sale, ordering the cancellation of Ciacho’s titles, and the revival of Cerilla’s titles subject to Ciacho’s mortgage encumbrance. The CA affirmed the RTC, holding Cerilla was a mere accommodation party with no authority to sell, and Ciacho was not a buyer in good faith as he was aware of the adverse claims.

ISSUE

Whether the Court of Appeals erred in ruling that there was no valid contract of sale between Cerilla and Ciacho.

RULING

The Supreme Court denied the petition and affirmed the CA and RTC rulings. The Court held that Cerilla was merely an accommodation party who helped Adolfo redeem the properties to prevent foreclosure. The series of transactions showed no real intention to transfer ownership to Cerilla; the subsequent un-notarized deed of resale to Adolfo and the MOA confirmed Adolfo’s retained ownership interest. Since Cerilla was not the lawful owner, he had no authority to sell the properties to Ciacho. Furthermore, Ciacho could not be considered a buyer in good faith. He was aware of the adverse claims annotated on the titles and required their cancellation before proceeding with the loan and subsequent sale. His knowledge of the defect in Cerilla’s authority precludes the protection accorded to purchasers in good faith. The issuance of new titles in Ciacho’s name does not cure the fundamental lack of authority of Cerilla to convey ownership. Therefore, the Deed of Absolute Sale between Cerilla and Ciacho was invalid.